Danubius International Conferences, 10th EIRP & 5th AGAUC International Conferences

The Determinants of FDI in the Central and Eastern Europe: The Impact of the European Integration

Hanna Makhavikova
Last modified: 2015-04-23


The amount of FDI inflows to the Central and Eastern Europe increased dramatically during the last two decades. This article is aimed at identifying the ability of the Central Eastern European countries to attract FDI in the context of European integration, and at estimating the most important factors that influence the decision of foreign investors to invest in the region. Despite the broad research has been devoted to define the FDI determinants, the literature dealing in particular with the role of the European Union in the mobilization of FDI is rather scarce, and these findings are very discrepant. In order to understand factors that influence the location of FDI, we employ an empirical model for the period of 1992-2013 for twenty CEE countries. This study reveals that the most important determinants of FDI in CEECs are the market size, cost of labor and the European integration. The results of the research can be used to estimate the effect on FDI inflows from a prospective additional Eastern expansion of the EU by the countries currently not within the EU.